Owners at Resort at Singer Island sue over high fees
By Jane Musgrave
Palm Beach Post Staff Writer
Posted: 6:46 p.m. Tuesday, March 16, 2010
WEST PALM BEACH — Beleaguered owners of hotel units at the Resort at Singer Island are fighting back.
In a lawsuit filed in Palm Beach County Circuit Court, the association that represents those who own the 239 hotel units claim the chain that owns the oceanfront high-rise is soaking them for fees. Further, it claims it should have a far greater say in how the fees are set and other policies that have driven many owners into foreclosure.
According to condominium documents, the only part of the resort the association controls is a small fourth-floor conference room, said attorney Daniel Rosenbaum. Unlike boards that oversee regular condominiums or even other condotels like the resort, the Singer Island board doesn't oversee the grounds, the pool, the utilities or any other parts of the building that are typically considered common property.
That means Urgo Hotels, which bought the $210 million resort when WCI Properties was emerging from bankruptcy, has near complete control over the building and the owners have almost none, Rosenbaum said.
The arrangement, he claims, is contrary to Florida law. No one from the Bethesda, Md.-based chain returned a phone call for comment.
The lopsided arrangement allows the chain to set fees that owners can't contest. Rosenbaum said it has refused to explain the justification for fees. Many overlap, he said. For instance, in addition to paying utility bills, owners pay special utility assessments. The combination means owners are charged 266 percent of the actual bill Urgo is paying, he claims.
Unit owners who bought the condo hotel units as an investment told The Palm Beach Post in January that the fees have cost them tens of thousands of dollars. At the same time, rental rates have declined and the value of the units have tanked.
There are also 66 regular condominium units in the building. Those are not part of the lawsuit.
Singer Island Resort’s drained investors claim deceit They say they’re victims of unforeseen fees and false promises of profit.
By Jane Musgrave
Palm Beach Post Staff Writer
Updated: 11:34 p.m. Sunday, Jan. 17, 2010
Posted: 9:34 p.m. Sunday, Jan. 17, 2010
RIVIERA BEACH — Rising more than 200 feet above the white sands of Singer Island, the marble- and onyx-appointed Resort at Singer Island opened to rave reviews in 2007, attracting the likes of then-presidential candidate Barack Obama and tennis star Jennifer Capriati.
“It’s heaven on Earth,” cooed Riviera Beach Mayor Thomas Masters, a Baptist preacher.
Celebrity-watching and biblical references aside, the resort has become a living hell for many who thought they could make money by buying one of its 239 units.
“It’s just been a devastating thing,” said Sam Lasorda, owner of a Pennsylvania pest control company. “It’s been a financial disaster.”
Court records show nearly 60 units are in foreclosure. At least $1.5 million in assessments hasn’t been paid. And those numbers are expected to increase.
“I have no intention of paying any more of those fees,” said George Melillo, a retired pharmaceutical company executive who lives in Naples. “At the first of the year I decided to take my $300,000 loss and go on my way.”
Real estate experts aren’t surprised that the luxury hotel is in trouble.
Conceived at the height of the sizzling real estate boom, the resort is a condo-hotel. Owners said they plunked down hundreds of thousands of dollars with the promise that they would make money when the units were rented for as much as $600 a night.
Of course, the big returns never came, said Jack McCabe, CEO of McCabe Research and Consulting in Deerfield Beach.
“It was a failed business model from the get-go,” he said of the concept that was used to finance hotels in tourist meccas nationwide. “None of them is yielding any positive income for owners.”
Like other condotel owners, those at the resort were hit hard by the recession. But owners of the Singer Island condotel were uniquely affected.
A year after developer WCI Communities completed the project, its then-chairman, billionaire financier Carl Icahn, announced it was filing for bankruptcy. As part of its reorganization, it sold the $210 million resort to Bethesda, Md.-based Urgo Hotels for $7.1 million. Instead of being run by the upscale Starwood brand, it is part of the more pedestrian Marriott chain, which doesn’t fetch the promised sky-high rates.
“It was like the perfect storm,” said Lasorda, whose $750,000 two-bedroom unit is now appraised at $240,000. But the economic storm isn’t what hurt the owners. They say they were victims of false promises.
Owners said they were told the investment was a sure moneymaker. “They said it would be a 75-25, possibly a 65-35, split in our favor,” said Melillo, who paid $995,000 for his unit.
What they weren’t told was that various charges would eat into their profits. Owners are charged for housekeeping, reservation expenses, agent commissions, marketing, maintenance and insurance.
After all the expenses had been paid, the $50,402 one owner made in 2008 was reduced to $21,790. But that didn’t include the $2,650 monthly assessments, $8,300 in annual property taxes, $1,000 for yearly insurance or $40,000-a-year mortgage, plus other expenses. They turned the $21,290 profit into a nearly $60,000 loss.
For Jupiter resident Ray Johnson, it became too much.
“I stopped paying,” he said. “I’ve never done anything like it in my life. It’s a personal hell for me, but it was a matter of survival.”
His $750,000 unit is now in foreclosure. He received an offer for $150,000.
Kevin Urgo, a senior vice president for the hotel chain, said he understands the frustration of the unit owners in the renamed Palm Beach Marriott Singer Island Resort & Spa. Since taking over two months ago, the company has worked to reduce costs and increase revenue, he said.
When it bought the hotel, it also assumed ownership of 14 of the hotel units and four of the 66 residential condominiums, one of which tennis champ Capriati owns. It means the company has a big stake in keeping the costs under control, Urgo said.
“You’re going to see a turnaround in fairly short order,” he said.
Owners suspect it will cost them. The lobby is being renovated to reflect Marriott’s signature “Great Room” concept. The chain said reserve accounts will be tapped to pay for the renovation. Owners expect to be asked to beef up depleted accounts.
The frustration is that they don’t know
if they can stop it. Urgo said he isn’t sure what approvals
would be needed.
Many said they plan to heed that advice.
“It’s sad. It’s such a beautiful
property,” Johnson said. “It could have been such a gem for